The Middle East Rating and Investors Service (MERIS) confirmed the local rating of the Housing and Development Bank (HDB) at A- with a stable outlook.
According to the bank’s statement, the valuation relied on the company’s performance studies based on the financial statements for the financial period ending in December 2017.
“The credit rating granted to the HDB reflects the relative improvement in the banking sector in Egypt, driven by the improvement in the country’s macroeconomic performance, and the commitment of the government to achieve financial and economic reform,” the MERIS’s report read.
The HDB recently applied the New Core Banking System, which will provide the bank with required resources and facilities to offer a wide range of banking products and serve a larger customer base, which was one of the factors impacting the rating.
According to MERIS, an (A) rating refers to the bank as above-average creditworthiness against other local banks, which means less exposure to credit risks, in addition to its ability to pay its debts when they mature, while the sign (+/-) indicates a lack or increase in the level of risk in the same degree.
The total loan portfolio of the HDB reached EGP 13.4bn at the end of December 2017, against EGP 10.5bn in December 2016, while the loans to deposits ratio stood at 43% in December 2017.
The bank achieved a net profit growth of 57% between 2016 and 2017, where net profits scored EGP 1.076bn in December 2017 against EGP 685m in December 2016.
The bank’s credit rating was based on several factors, including high growth rates after the implementation of the modern banking system, reliance on stable funding resources, and the increased profitability driven by high investments in treasury bills with good interest.
The bank’s rating was also based on the improvement in the bank’s liquidity and solvency ratios due to the introduction of land and residential units for the ministry of housing, as well as the increase in the volume of customer deposits in the bank, in addition to the strong participation of the bank in the mortgage finance sector in Egypt.
According to MERIS, the bank still faces some challenges, notably in the human resources sector, although the bank’s management is seriously working on it. Moreover, the bank’s information systems were fully updated in 2016, however it still needs to implement modern technological services, such as online and phone banking.
The MERIS added that despite the remarkable development in the means of communication between the different departments of the bank, there is still a need to support the institutional preparation of the bank.
The report also noted that one of the most important challenges facing the bank is the need to attract long-term resources needed to finance long-range loans.